eCheck vs ACH: What are Their Similarities and Differences

When transferring from bank to bank, eChecks and ACH transactions are extremely common. Consumers, small businesses, and large companies alike all send or receive payments in these forms. For those who aren’t entrenched in the payment space, the differences between these two are negligible, and the terms are used interchangeably.

But as transaction volumes and the regularity of these payments increase, it becomes extremely important that business owners learn the differences between these modes of payment.

The process of the ACH and eChecks may be similar, but there are some key distinctions between the two. With B2B ACH payments growing in value from 4.42 billion in 2020 to 5.32 billion in 2021, it’s important to better understand these payment methods and which offers the best financial outcomes.

TL;DR: eCheck vs ACH

Don’t have a lot of time? Here’s a side-by-side comparison of eChecks and ACH:

eCheck ACH
Frequency One-time payments May be recurring
Processing Time 1-3 business days, but could potentially take longer when verifying one-off transactions 1-3 business days
Fees / Cost Varies, but typically $0.30 to $1.50 per transaction Varies, but typically between 1.4-3.5%
How Payments Are Carried Out Through the ACH network Through the ACH network

 

What’s an eCheck and What’s an ACH Payment?

ACH (automated clearing house) payments have been around since the late 60s. Paper checks were on the rise, and bankers worried that the technology at the time could not keep up with processing volumes. Wise heads came together, and the ACH network was developed to process the traditional paper check.

Through ACH processing, merchants could accept the paper check using the routing and account number of the customer’s bank account as well as authorization from the customer.

ACH payments allowed consumers or businesses to take payments directly from the payers’ bank account upon receipt of their checks.

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Translation: Check payments were essentially a form of ACH payment processing. Once received, the payment went through the automated clearing house. The same is true with the eCheck.

Electronic checks (eChecks) work a lot like a traditional check. They are, in fact, the digital solution to the paper model.

Today, check or no check, ACH payments enable bank-to-bank payment processing. ACH is the process, and the check or eCheck is the payment method.

Tip: If that’s a bit of a head-scratcher, it may help to think of it another way: All online transactions are electronic payments, but the payment methods can change. PayPal, credit card, debit card, and bank transfers are all electronic payments. They’re just different payment methods.

Checks and eChecks are under the ACH umbrella, handled through the ACH process. There are just a few ways ACH payments can be made. Checks and eChecks are but one.

Differences: Electronic checks and ACH payments

Although eChecks are processed as ACH payments, there are still differences that merchants should be aware of.

How they work

We have a reasonable understanding now of how eChecks are processed. The payer submits an eCheck, which is, in effect, details for a one-time transfer from their everyday bank or checking account to the payees. Those details include the routing number, bank account number, and authorization to process the eCheck. Once received by the payee (the merchant), it is processed through the ACH network.

So how do check-free ACH payments compare?

ACH payments are electronic transfers that use bank routing numbers and bank account information to transfer payments between two (or more) banking institutions. On average, it takes one to three business days for ACH transactions to be processed. While that doesn’t sound ideal, ACH payments are favored for their lower costs when compared to wire transfers or debit cards.

Unlike eChecks, which are one-off payments, ACH payments are commonly used for recurring payments, direct deposits, and large transactions. The bank information provided for ACH payments is stored for future online payments. eChecks are once-offs. The process is the same, but the payment information is not stored.

Here’s an example. Let’s say you run an accounting firm and want to lower your payment processing fees by accepting ACH and eCheck payments. You can implement either or both, depending on the service.

If you offer ongoing bookkeeping services, you can bill your clients every month by asking for their banking information and having it on file. On the other hand, if you offer one-off services like IRS audit assistance, then you can bill clients via eCheck. In this case, you can ask your clients to initiate a one-off eCheck transaction online instead of writing you a paper check.

Who’s involved in these EFTs?

Both eChecks and ACH fall under the term EFTs (electronic funds transfers). In both cases, funds are being transferred electronically from one party to the other.

The payment parties are the same for both payment options. The financial institutions communicate to confirm the bank accounts and authorization to process the ACH debit or ACH credit.

ACH debit: when the merchant is withdrawing funds from the other party’s account. (E.g., for a recurring subscription payment.

ACH credit: when the merchant is paying funds to the other party’s account. (E.g., paying salaries to staff.)

Again, the main difference is that ACH payments specifically will store the payment information for future debits.

Processing times

Once authorized, ACH processing and eCheck processing take the same time: one to three business days. But there is an extra step for eChecks that make them a little slower.

As eChecks are one-off payments, steps need to be taken to verify and authorize the payment. The merchant account needs the green light to process the eCheck through the ACH network. While it’s all done automatically, once the eCheck is submitted, it can take an extra 24-48 hours. eChecks then can take two to five days to process.

Processing fees

Different payment processing providers have different processing fees, so giving definitive values is difficult. However, it is common for eChecks to attract an additional processing fee as there are extra steps in the check processing — verification. eChecks that bounce can also attract extra fees.

There can be ACH return fees and reversal or chargeback fees in both cases. These can be different depending on the merchant services account.

Similarities: ACH vs. eChecks

As we have highlighted the differences, the similarities will have become evident on their own. ACH payments and eChecks are both processed through the ACH network. They both work with electronic funds transfers to move funds from one financial institution to another. They are both bank to bank, rather than traditional payment processing, which may be a credit card payment going to a merchant account.

How to implement ACH and eCheck payments

ACH payments (eChecks included) should be considered essential to accept. Processing fees are low, security is high, and customers greatly appreciate the convenience. Transfers coming straight from customers’ accounts, rather than their card, let them avoid certain fees, and the same benefits go for merchants.

Implementing these payment solutions is simple. Through the right payment processor, merchants can set up an ACH payment gateway that facilitates the ACH payment process. With this setup, merchants can simply request customers’ authorization to use this payment method. Payment details are then set up, and the payment information is submitted.

Stax makes it simple

Businesses rarely have just one type of payment processing need. Whether in-store, online, or strictly B2B services, a diversity of payment options is a must.

Stax Pay processes payments of all types. We help businesses with eCheck processing, ACH payments, credit card payments, digital payments, and all other transaction types. And we do this with transparent pricing, no hidden monthly fees.

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FAQs about eChecks and ACH Transactions

Q: What are eChecks and ACH transactions?

eChecks and ACH (Automated Clearing House) payments are standard methods of transfer between banks. An eCheck works much like a traditional check but in a digital form. ACH payments, however, can be made with or without a check and involve processing through the ACH network using the customer’s bank account details.

Q: How are eChecks and ACH payments similar?

Both eChecks and ACH payments are processed through the ACH network, involve electronic funds transfers, and move funds from one bank account to another. They cut out traditional payment processing methods like credit cards, reducing associated costs.

Q: What distinguishes eChecks from ACH payments?

The major difference lies in their usage and data storage. eChecks function as one-off payments, and the banking information isn’t stored post-transaction. ACH payments, on the other hand, can be recurring, involving the storage of payment information for future deductions.

Q: How do eChecks and ACH payments work?

eChecks involve a one-time transfer from the payer’s bank account to the payee’s, with the transfer’s details, including the bank routing number, account number, and authorization to process the eCheck. ACH payments use bank routing numbers and account information to facilitate transfers between banking institutions, taking one to three business days to process.

Q: What is the processing time for eChecks and ACH payments?

Generally, ACH processing and eCheck processing have the same time duration: one to three business days. However, since eChecks require additional steps for verification, they might take between two to five days.

Q: Are there any additional costs when using eChecks or ACH payments?

The processing fees for both can vary, and eChecks might attract an added fee due to the extra steps required for check processing. Also, factors like ACH return fees, reversal fees, or chargeback fees can influence the total cost.

Q: How can businesses implement eCheck and ACH payments?

Businesses can set up an ACH payment gateway through a suitable payment processor, such as Stax Pay. This enables them to request customer authorization and process various payments, including ACH payments, eCheck processing, credit card payments, and more.

Q: Who benefits from eCheck and ACH payments?

Both customers and merchants find it beneficial. Customers notably appreciate the convenience and potentially lower costs. For businesses, these efficient methods offer high security, reduced fees, and a range of options to fit varying service types and payment structures.